Don't rush into a viatical settlement

If you or someone you love is terminally ill, you may be looking into a viatical settlement, which involves selling your life insurance policy to a company for a cash payment that you can spend while you're alive. Viatical settlements can provide you with immediate cash to help you maintain your financial independence. But bear in mind that these transactions are incredibly complex, and because this market is loosely regulated, fraudulent viatical settlement companies do exist. Consider these tips:

1. Shop around. Contact at least two or three viatical settlement companies to compare offers. Many will pay up to 80 percent of the face value of a life insurance policy, depending on the life expectancy of the policyholder.

2. Consider your options. If you need cash, there are alternatives to allowing a viatical settlement company to become the sole beneficiary of your life insurance policy. Consider asking an original beneficiary of your policy for a loan, or contact your insurance company to inquire about its "accelerated benefits" provisions for policyholders.

3. Seek professional advice. A viatical settlement will deny your original beneficiaries of any of your life insurance benefits. Consult with a knowledgeable attorney about probate and estate ramifications.

4. Ask taxing questions. You also should meet with a tax adviser to discuss the impact such a settlement would have on your taxes and your ability to qualify for Medicaid and other public-assistance benefits. Ask the viatical settlement company for clear, straightforward information on these matters, as well.

5. Shun high-pressure tactics. Don't feel obligated to accept an offer from an aggressive settlement marketer. Remember, if the promises you're hearing sound too good to be true, they probably are.

6. Check out the company. Call the Florida Department of Insurance at (800) 342-2762 to check the company's complaint record and to make sure the company is licensed in Florida. You also may check the company's complaint history by calling the Florida Department of Agriculture and Consumer Services at (800) 435-7352 and the Better Business Bureau at (800) 955-5100.

7. Make sure you'll be covered. Verify that the company, or the third-party investor the company has lined up, definitely has money on hand for your payout as soon as all the paperwork is completed.

8. Opt for an escrow account. Before you sign anything away, require the viatical settlement company to set up an escrow account with a reputable financial institution that is independent of the company. An escrow account will prove that the money is available to cover the offer.

9. Demand prompt payment. Once the insurance company has assigned the viatical settlement company as the beneficiary, you should receive your money within two to three business days. It should not take more than a few months to complete the entire transaction.

10. Talk to the company about privacy issues. Be aware that some companies may reveal personal information about you when they act as brokers for your payout from potential investors.